World Added $24 Trillion COVID Related Debt for $281 Trillion Total

Worldwide debt increased to $281 trillion and worldwide debt-to-GDP ratio is now over 355%. The Institute of International Finance’s global debt monitor estimated government support programs were half of the rise, while global firms, banks and households added $5.4 trillion, 3.9 trillion and $2.6 trillion respectively.

During the 2008-2009 financial crisis the debt-to-GDP jumped 10 percentage points in 2008 and 15 percentage points in 2009. In 2020, the world increased debt by 35 points from 320 to 355%. The debt spending is still increasing in 2021.

Global government debt is expected to increase by another $10 trillion this year and surpass $92 trillion. It is highly likely total world (government, corporate, bank and household debt will pass $300 trillion by the end of 2021.

What Does All of This Debt Mean?

There is no meaningful country or region that does not have a lot of debt. The US, Europe, Japan and China all have a lot of debt.

There has been no political will to actually pay down debt. The best achievement was to hold debt to GDP stable for a decade.

The best debt to GDP ratio for the USA was at the end of the 1970s. Public debt in 1980 was about 30%. this was the government only portion. There had been a mostly steady decline from the 80% level of the Great Depression and then the 130% level at the end of WW2.

The post-WW2 economic boom cut the Debt to GDP levels nearly in half by 1955.

Despite the high debt of WW2 there was no shift to another currency. The global finance system did decouple from the gold standard.

The best path forward from the current situation is to get a lot of economic growth from a technological boom. There will also be semi-coordinated efforts by all world governments to water down the debt.

Inflation will be hidden with false statistics. There will be a lot of asset inflation. Houses and stocks will increase. Hard currency will deflate. This is part of the scenario where cryptocurrency continues to strengthen.

It would seem individual financial strategy would be to get on the same side as the economic solution where big government, big banks, big companies and big tech engineer some plans where they win.

Written By Brian Wang,